Sunday, July 01, 2012

Stock Market Rally Follows Through and Early Entries Working


Volume patterns on US indexes have turned decisively positive.  There hasn't been any signs of distribution.  Indexes have tremendous resilience to bad news, and selling volume is suspiciously low.  It seems demand is in the market but everyone is hesitant.  Intermediate trend is up and historical models indicate a low probability of a major bear and more upside to new yearly highs in the coming months.  Next two to four weeks could feel rough as many stocks still need time to complete their consolidations.  Early entries should not be ignored while waiting for more traditional setups before getting aggressive.  Accumulate.  Pullbacks are buying opportunities.


European stock markets could continue rallying on relief over another possible step towards some direction, but over the next few months contagion will continue.  Europe along with the ERUO, Gold, & Silver are going to be in multi month/year bear markets.  Each hiccup will make the US stock markets appear to have topped for good.  Each hiccup will be met with another band aid until they can figure out some master solution.  After which, US rates will begin to rise, tax cuts will expire, & the US economy will undergo a cleansing recession (if allowed), and setup the next great Secular Bull Market. That's the bad and the good of it.


US home prices will not start rising decisively until US interest rates return to normal and employee incomes rise significantly.  There will be fits and starts, but rising rates with slow growth in employee income will keep a cap on home prices in most areas. The fastest route is to incentive growth. That's also the most painful. Higher interest rates, certainty in the tax code and regulatory environment, and a recession that's allowed by the FED and Politicians to cleanse the capital inefficiencies in the private and public sectors.


As always, use the Leading Stock Analysis to find new breakouts, failed breakouts, and focus on the 1 and 2 rated stocks with the new price targets as guides to potential.  Be careful, the stock with the most possible appreciation isn’t always the best stock.  Don’t be greedy, stay patient, and pick the best fundamentals and technicals.